2/23/2001 @ 8:25PM

Another Swing And Miss For Kozmo.com

After four years of bringing $1.69 bags of Chee-tos and $4.99 rental movies to lazy city dwellers, the online delivery service
Kozmo.com
has realized that it’s never going to make money simply satisfying late-night cravings via its Web site.

So today it announced that to augment those slim sales, Kozmo will begin duplicating its online offerings in a print catalog and publicize a toll-free number, in order to attract customers who are less Internet-savvy. Kozmo is also introducing ready-to-eat gourmet meals and has partnered with a few restaurants to deliver their food, much like existing restaurant-delivery services. The site also laid off 60 employees at its New York headquarters.

Like its competitor
Urbanfetch
, which ditched its consumer business in October to essentially become a glorified messenger service, Kozmo must reinvent itself or die.

“We’re looking to broaden our reach,” says
Gerry Burdo
Gerry
Burdo
, Kozmo’s CEO. “When I came in, our customers were younger, less affluent and more price-sensitive. Now we appeal more to the urban sophisticate.”

Indeed, Kozmo is frantically trying to ditch its college-student customers, who last year made up 76% of its business, in pursuit of those who will pay a premium to have thousands of items, from DVD players to cotton swabs, delivered to their doorsteps in an hour. Last year, Kozmo currently did 90% of its business after 5 P.M., and these late-night shoppers spent an average of $12 each. The company, meanwhile, spent $30 million to develop its delivery software. The company had a staff of 1,500–most of them delivery people using bikes, scooters, cars and vans to get that copy of The Breakfast Club across town. For all that work, Kozmo expected to make money by marking prices up slightly on delivered items and charging a $1.99 delivery fee.

But if Kozmo’s old business plan was silly, this new one may be nearly as misguided. The catalog, out April 1, will feature five main product categories: entertainment, meals, grocery, drugstore and gift shop. But the bottom line is that Kozmo’s only advantage over hundreds of competing gift, clothing and electronic catalog retailers is that Kozmo can deliver in an hour. And how big is the market of people who really need a DVD player or sweater in an hour?

On the restaurant-delivery services front, it’s a legitimate business, but Kozmo will have plenty of competition from numerous restaurant-delivery services established years ago in San Francisco, New York and the seven other cities it operates in.

In fact, Kozmo’s appeal doesn’t translate well beyond the young customers the company hopes to shed. College students will pay a few extra bucks to get a pint of ice cream without getting off the couch; their parents, however, aren’t likely to pay extra to get that ice cream in a jiffy. Kozmo is a cool idea, and may have even looked like a good company back when everyone was riding the dot-com high, but it just doesn’t hold up in the real world. Companies like
Webvan
and
Peapod
have proven that home delivery isn’t that lucrative.

Another of Kozmo’s last-ditch plans revealed today: To rent its fleet of delivery people and warehouse space to other retailers. But in the current slumping retail environment, it’s unlikely that many companies want to expand their delivery services.

For Kozmo, which shelved plans for an IPO last summer and fired 275 workers, the end may come soon.

When it does, it will no doubt be sorely missed by college students across the country.